Residential developers in Greater Bangkok should exercise caution regarding new launches over the next nine months as the market is showing signs of strain, with declining sales and increasing unsold inventory in the second quarter.

Vichai Viratkapan, acting director-general of the Real Estate Information Center (REIC), said new residential sales in Greater Bangkok experienced a consecutive slowdown in the second quarter following the first quarter.

"Developers should monitor unsold stock across all categories and price ranges, particularly in locations where sales have slowed and absorption rates have dipped, as observed in many areas," he said.

According to the REIC, new residential sales in Greater Bangkok declined by 8.4% year-on-year in the second quarter to 14,938 units valued at 84.3 billion baht, a decrease of 2.2%.

The largest drop was in low-rise houses which fell by 11.5% to 8,909 units worth 60.2 billion baht, slightly increasing by 0.1%, while condo sales saw a decline of 3.4% to 6,029 units worth 24 billion baht, down 7.5%.

With new supply launched in the second quarter totalling 17,197 units worth 128.4 billion baht, dropping 24% and 0.4%, respectively, the number of unsold inventory rose by 12.6% to 214,590 units worth 1.26 trillion baht, an increase of 33%.

This marked five consecutive quarters of growth in unsold stock, said Mr Vichai.

The largest increase in unsold inventory was in condos, with a rise of 14.5% to 84,556 units worth 379.5 billion baht, up 27%. Unsold low-rise houses increased by 11.4% to 130,034 units worth 886.7 billion baht, up 36%.

Due to the large number of unsold residential units, it would take over two years for condos to be absorbed, assuming no new supply is added, said Nuttaphong Kunakornwong, chief executive of SET-listed developer SC Asset Corporation.

"The condo situation is less concerning than that of low-rise houses as the latter will take up to 4.5 years to be absorbed, more than double the usual two years," said Mr Nuttaphong. "The residential market will recover by mid-2025."

Therdsak Thaveeteeratham, executive vice-president of Asia Plus Securities, said the overall nearly four-year absorption period for residential inventory including condos and low-rise houses in Greater Bangkok was quite lengthy.

"We are less concerned as most of the inventory consists of low-rise houses which are more manageable. Developers can phase the development," said Mr Therdsak. "However, it becomes worrying if that inventory is tied to debt."

According to Asia Plus, 22 SET-listed residential developers had a total debenture of 314.3 billion baht as of the end of last year. Of this amount, 106.2 billion baht will mature this year, 99.4 billion baht next year and 70.6 billion baht in 2026.

"Most of these developers are rated B and BBB. Even the latter is considered risky," he said. "Although previous defaults were isolated cases, if concerns spread, it could lead to a loss of confidence and developers may struggle to roll over debentures."